The long-running standoff between Federal Reserve Chairman Jerome Powell and President Donald Trump has entered dangerous new territory. Federal prosecutors have opened a criminal investigation into Powell, a move the Fed chief himself described as “unprecedented” and deeply troubling for the independence of America’s central bank.
In a video statement released on Sunday, Powell revealed that the US Justice Department served subpoenas on the Federal Reserve and threatened a criminal indictment. The probe relates to testimony Powell gave to a Senate committee regarding the costly renovation of two historic Federal Reserve buildings in Washington.
Powell openly suggested that the investigation followed his refusal to bow to repeated pressure from Trump to cut interest rates faster and deeper.
Why Is Jerome Powell Under Investigation?
The investigation centres on Powell’s statements to lawmakers about the renovation and modernisation of the Federal Reserve’s Eccles Building and another adjacent office building. The project marks the first major overhaul since the structures were built in the 1930s.
The Fed has said the renovation includes necessary health and safety upgrades, such as removing asbestos and lead, and will reduce long-term maintenance costs. However, Trump has sharply criticised the project, claiming the costs ballooned far beyond estimates.
While the Fed has maintained that its projections remain accurate, prosecutors are examining whether Powell’s congressional testimony misrepresented details of the renovation.
Powell Warns of Political Pressure on Monetary Policy
Powell framed the investigation as a threat not just to him personally, but to the Federal Reserve’s role as an independent institution.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said.
“I have deep respect for the rule of law and for accountability in our democracy. No one, certainly not the chair of the Federal Reserve, is above the law, but this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure,” he added.
Trump Responds: Denial, Criticism, and Sarcasm
President Trump publicly denied having any knowledge of the Justice Department’s investigation. At the same time, he renewed his criticism of Powell’s leadership.
“I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings,” Trump said.
Trump originally nominated Powell as Fed chair in 2017, but later turned into one of his harshest critics, repeatedly accusing him of keeping interest rates too high and hurting economic growth.
Can Trump Arrest or Remove Jerome Powell?
Despite the political noise, the President cannot directly arrest the Federal Reserve chair. Criminal investigations fall under the Justice Department and must follow due legal process. Any arrest or indictment would require evidence and judicial approval.
Similarly, Trump cannot simply fire Powell at will. Federal law protects the independence of the Federal Reserve. A sitting Fed chair can only be removed for cause, not for policy disagreements.
Powell’s current term as chair runs until 2026, and his position on the Fed’s Board extends beyond that unless lawfully removed.
Political Fallout and Warnings From Lawmakers
The investigation has alarmed lawmakers across party lines. Republican Senator Thom Tillis warned that the move threatens the independence of the Federal Reserve and said he would oppose any future Fed nominations until the legal matter is resolved.
Democratic Senator Elizabeth Warren accused Trump of attempting to force Powell out and replace him with a loyalist, calling it an effort to take control of America’s central bank.
Both sides warn that political interference in monetary policy could damage market confidence and global trust in the US financial system.
Why This Clash Matters Beyond Washington
The Powell-Trump conflict comes at a sensitive moment for the global economy. Markets reacted swiftly, with investors flocking to safe-haven assets like gold and silver amid uncertainty.
Economists caution that undermining the Federal Reserve’s independence could lead to higher inflation, unstable markets, and long-term economic damage.
As the investigation unfolds, one question looms large: Is this a legitimate legal inquiry, or a dangerous escalation in a political battle over who controls America’s money?
For now, the clash between Powell and Trump stands as one of the most consequential power struggles Washington has seen in years.
